The global market turmoil extended to Wall Street on Thursday as US equities tumbled and the dollar hit new lows against the yen and the euro.

The collapse of a private equity fund sparked renewed concerns about liquidity levels in the financial system, further damaging sentiment as the dollar continued to weaken.

US equity markets fell fast in opening trade as weak economic data added to the gloom. The Dow Jones Industrial Average lost 155 points or 1.3 per cent to 11,597.1. The broader-based S&P 500 was 1.4 per cent weaker at 1,291.0. The fresh losses followed a sharp pull-back on Wednesday.

US retail sales fell by a bigger-than-expected 0.6 per cent, compared with consensus forecasts of an increase of 0.2 per cent. Initial jobless claims were unchanged from a week ago, while continuing claims hit a two and a half-year high.

Equity markets around the world tumbled as the dollar breached the Y100 level against the yen for the first time in 12 years, while the euro hit a new record high and the Swiss franc neared parity with the greenback.

Carlyle Capital Corporation, a heavily-leveraged fund listed in Amsterdam and an affiliate of US private equity firm The Carlyle Group, said late on Wednesday that it had defaulted on $16.6bn of debt. It said that during the last seven business days, it had received margin calls in excess of $400m that it could not meet.

Rising uncertainty led investors to flee equities in search of safety in gold and government bonds. It also prompted renewed selling of the dollar, which had made gains in recent sessions following the Federal Reserve-led injection of $236bn to boost liquidity in global credit markets.

Gold prices moved nearer to $1,000, rising to $998.05 per troy ounce, while oil was at a fresh record of $110.85.

The renewed dollar weakness came despite comments from Jean-Claude Trichet, president of the European Central Bank, about “excessive exchange rate movements”.

”On exchange rates, particularly against the dollar, I reaffirm that disorderly movements in exchange rates are undesirable from the point of view of economic growth,” he said in an interview with French magazine Le Point.

Concerns over the yen’s strength against the dollar and its potential effect on Japanese exporters’ profits drove the Tokyo Stock Exchange’s benchmark Nikkei 225 stock average down 3.3 per cent to its lowest level of 2008.

Other markets in Asia also ended lower. The Hang Seng closed down nearly 5 per cent at 22,301.64 and the benchmark Shanghai composite index finished down 2.4 per cent at 3,971.26.

In Europe, London’s FTSE 100 traded 114.2 points, or 2.5 per cent, lower at 5,632.2 by mid morning in London. The CAC 40 in Paris fell 2.4 per cent to 4,582.93 while the Xetra Dax in Frankfurt fell 2.4 per cent to 6,440.52. Overall, the FTSE Eurofirst 300 lost 2 per cent to 1,259.85.

Fixed-income markets rallied as investors sought safety. June Bund futures rose 28 basis points to 117.91, and the yield on the ten-year Bund fell 2.9 per cent basis points to 3.72 per cent.

”Talk of hedge funds in trouble and suggestions from US regulators that funding difficulties remain significant serve as a reminder that underlying dislocations are not set to disappear any time soon,” said Sean Maloney at Nomura.

He added: “The measures [undertaken by central banks] so far, merely scratch the surface rather than dig deep into underlying problems. A more comprehensive resolution still lies some way off.”